Haight v. Marin Municipal Water District

The judgment for plaintiff in the sum of $10,500 is hereby affirmed. Plaintiff Charles 0. Wellock, having died during pendency of the action and his administratrix having been substituted in his stead, the use of the word “plaintiff” herein will refer to said Charles O. Wellock, deceased. The defendant has appealed.

The action is one to recover damages for the alleged breach by defendant of a contract to sell and convey to plaintiff a tract of land of 459 acres lying near Fairfax, Marin County, California. On April 3, 1925, defendant, upon payment to it by plaintiff of the sum of $500, executed to him a fifteen-day option to purchase said land for the price of $50,000. On the next day, April 4th, the option was confirmed, but amended to a certain extent, by a letter from defendant providing the terms of payment of the purchase price. On or about the same day a proposed draft of the contract of sale and purchase was drawn up by the attorney for defendant and delivered to plaintiff optionee. Evidently it was the belief of defendant that plaintiff would either subdivide said property and sell same himself or would sell the property outright to another, who would subdivide.

On or about April 14th the board of directors of defendant District learned that it was the purpose of plaintiff to resell the lands in question to certain purchasers for the price of $60,000, whereupon a special meeting of the board of defendant was called on April 15th to consider the revocation of said option. Ten of the members of the board attended the meeting and it was pointed out to them that the optionee would enjoy a profit of $10,000 and would have a possible claim for a five per cent commission in addition thereto upon sale of the property. A resolution to cancel and revoke the option was then introduced, but failed of passage by a vote of five to five, at least eight votes being required for affirmative action. On this day the optionee expressly waived any commission which might accrue to him and stood upon his rights under the option, claiming that he was dealing in his own right as principal.

With matters in this condition the optionee, on April 18th, gave notice in writing to the District of his acceptance of the offer contained in the previous letters of April 3d and 4th. The board again met on April 21st, at which time it reconsidered the whole subject matter, including the acceptance of the offer that had been made subsequent to its last meeting. Plaintiff and his attorney attended this meeting as did also the purchasers and their attorney. The meeting was thrown open to all present and, after a general .discussion by the parties and their attorneys, the board adopted a resolution by an eight to-five vote, expressly con- . firming said option and directing the executive committee to take up the matter of the agreement of sale between plaintiff and said purchasers and report at the next meeting three weeks later. Plaintiff and said purchasers, all being present, protested against adjournment without authorizing the execution of the said contract of sale. The board, however, adjourned for three weeks. On April 23d the .purchasers withdrew their check from escrow. This action followed.

The complaint sets up in detail the successive steps had between the giving of the option on April 3d and the final adjournment of the board on April 21st and charges in a rather inapt but, we think, effective manner, that the market value of the property was at the date of breach $60,000. It also charges facts sufficient to bring it within the purview of that portion of section 3306 of the Civil Code, which reads as follows: ‘ ‘ ... But adding thereto, in case of bad faith, the difference between the price agreed to be paid and the value of the estate agreed to be conveyed, at the time of the breach, and the expenses properly incurred in preparing to enter upon the land.” This is true because the facts detailed in the complaint show that the breach of the contract by defendant was wilful and done in the light of all the facts; hence warranting the conclusion

The court found that all the allegations of plaintiff’s complaint were true. This implies that the court found the market value of the property to have been $60,000 at the date of the breach and that the breach was committed in bad faith. The evidence supports these findings as appears from the above recital of what are really undisputed facts.

This conclusion, either directly or impliedly, disposes of all the defenses urged by appellant, only a few of which need be specially noticed. First is the claim that at the inception of the negotiations plaintiff was the agent of defendant and was acting in a fiduciary relationship to it; hence he could not accept a secret profit. If this was true at that time, the contention is, nevertheless, of no avail against the two corporate acts, by resolution of the board, sustaining the option in the face of full knowledge on its part of all the claims of plaintiff. The further contention that defendant was without power to execute the option in the first instance is also disposed of by said two corporate acts.

The claim that plaintiff was without ability or willingness to perform was waived by the deliberate failure of defendant to carry out the agreement on its part when concededly plaintiff was not in any respect in default. The further contention that plaintiff failed to show damage is answered first by the item of $500 paid out by him for the option, and second, by our conclusion above announced that the complaint plead bad faith on the part of defendant and also the market value of $60,000 of the property at the time of breach, and that the implied finding to this effect is supported by the evidence. Indeed, in defendant’s specifications of error there is no contention that the evidence was insufficient to prove this value for the property on the date of breach.

The excess of the market value over the option price and the item of $500 comprise the amount given plaintiff by the judgment. Under our construction of the complaint and the issues, the so-called rule of consequential damages, commonly called the Baxendale rule (Hadley v. Baxendale, 9 Exch. 341), applied in Hunt Bros. v. San Lorenzo Water

Further discussion is unnecessary.

Richards, J., Seawell, J., and Curtis, J., concurred.

I dissent. The majority opinion affirms a judgment for $10,500 against the defendant District based on the “bad faith” provisions of section 3306 of the Civil Code without sufficient proof of bad faith, and in the absence of a finding on the allegations of the answer charging the plaintiff with fraud and duplicity in his transactions, a finding which, if made, would necessarily have to be in favor of the defendant. When the word “plaintiff” is used herein it will refer to Charles O. Welloek, the original plaintiff.

During all of the times mentioned herein the defendant was and is a public corporation organized and existing under a statute (Stats. 1911, p. 1290, as amended), and was the owner of a tract of land near Deer Park, Marin County, consisting of 459 acres, and which it was willing to sell. The plaintiff was a duly licensed real estate salesman connected with the Bishop-Carlson Company, duly licensed real estate brokers.

In the latter part of 1924 the plaintiff went to John A. Burt, general manager of the defendant District, stated to him that he thought he had a customer for the Deer Park lands, and requested that the lowest cash figure for the same be quoted to him. The matter was placed before the board of directors of the District, which, on January 20, 1925, adopted resolution number 781 wherein it was “resolved that the board of directors of the Marin Municipal Water District will not consider any offer for said real property for a price less than $50,000; and be it further resolved concerning the granting of options for the sale of said property at said figure that, if deemed advisable by the general manager an option or options may be given which in no event shall exceed a duration of sixty (60) days, the consideration for such option or options to be $500 for a 15-day option, $1,000 for a 30-day option, or $2,000 for a 60-day option, the payment on such option to be ap

On April 3, 1925, the plaintiff paid to the District the sum of $500 and received a document, signed only by the general manager, purporting to grant to the plaintiff by name an option to purchase said lands for $50,000 cash. On the day following, to wit, on April 4, 1925, the general manager at the request of the plaintiff wrote a letter to the plaintiff in care of Mir. John A. Prentice, commencing as follows: “Further confirming the option granted to you dated April 3d from the Marin Municipal Water District relating to 459 acres at Deer Park, I beg leave to state that the Marin Municipal Water District will grant the following terms of sale: Twenty-five per cent of the purchase price to be paid by you upon delivery of an agreement of sale; the balance of the purchase price to be payable in three equal installments, one, two and three years after date. ...” Then follow provisions appropriate to a contract for the purchase of lands to be placed on subdivision. Below the signature of the general manager a majority of the members of the board of directors appended their signatures to a statement that they affirmed the understanding set forth in the letter and that they “consent to the recommendation of its adoption by the board of directors.” On April 7, 1925, the purported option of April 3d and the above letter of April 4th were assigned by the plaintiff to John H. Rice and J. J. Greisen, subdividers of land, who placed in escrow such assignments together with a check for $22,500, payable to the plaintiff and indorsed by him, with an abstract company in San Rafael, with instructions to surrender said check for $22,500 to the plaintiff when the escrow should be completed. Upon failure to complete the escrow within ten days the check was to be returned to Rice and Greisen. The defendant in no sense became a party to the escrow matter. On the order of the plaintiff $10,000 of the $22,500 was to be paid to John A. Prentice on behalf of both the latter and the plaintiff and the balance of $12,500 was to complete the cash payment on the installment contract of purchase and sale which the general manager purported to authorize by his letter of April 4th. The defendant contended at the trial and now urges that at all times prior to April 7th the plaintiff was acting, as

• The foregoing facts appear without conflict in the evidence. They do not constitute a statement of all of the facts; but' are full and sufficient for the purpose of considering one. of the major contentions of the District. The facts relating to the further major contention that the plaintiff was the agent of the District in his activities with reference to the sale of said land will later be elaborated upon.

It is the contention of the District that no contract binding on the District resulted from the signing of the documents of April 3d and 4th by the general manager of the' District and the purported exercise of said options by the plaintiff. It may be conceded that if said documents of April 3d and 4th were the act of the District and binding in all respects .upon it the exercise of the option by the plaintiff on April 18th resulted in a contract sufficient in its details to constitute an agreement of purchase and sale, provided the same was not void or unenforceable by reason of the fiduciary relation of the plaintiff to the District, however inadequate the terms thereof might be as protecting the rights of the District.

It must be remembered that we are herein dealing with a public corporation whose directors are trustees of the taxpayers and inhabitants of" the District and we must measure the acts of the District with the yardstick of the statute of its creation. As stated, the District was organized under the statute of 1911 after an election duly held for that purpose. After providing the elaborate plan for the election and canvass of the vote, the act" provides in section 8 that “the board of directors shall be the governing body of such

Prom the foregoing it is seen that the statute prescribes the method for the execution of contracts authorized by the board of directors by imposing the duty to sign and countersign the same on the president and secretary. It is elementary in the law applying to public corporations that when the method of contracting is prescribed by statute such method is the measure of the power to contract. (Zottman v. San Francisco, 20 Cal. 97 [ 81 Am. Dec. 96 ]; Los Angeles Gas Co. v. Toberman, 61 Cal. 199 ; Frick v. Los Angeles, 115 Cal. 512 [ 47 Pac. 250 ]; Foxen v. City of Santa Barbara, 166 Cal. 77 [ 134 Pac. 1142 ]; 18 Cal. Jur., p. 1002.) If the president and secretary should refuse to execute a contract authorized by the board they could be compelled to do so as a duty especially enjoined by law. (Sec. 1085, Code Civ. Proc.) Since the law especially enjoined that duty on the president and secretary it was not competent for the board of directors to transfer that duty to any other officer or person. (Meuser v. Risdon, 36 Cal. 239 .) If the statute had not prescribed who should sign contracts on behalf of the District the situation would have been vastly different. (See Hayes v. Handley, 182 Cal. 273 [ 187 Pac. 952 ].) Nowhere in the statute is it made the duty of the- general manager to sign contracts on behalf of the District. His powers and duties are laid down in the law. He has nothing to do respecting the sale of lands of the

Assuming, however, that it was within the power of the board of directors to transfer the statutory duties of the president and secretary to the general manager in the matter of the execution of such an important contract, the record satisfactorily shows, first, that such power was not delegated with such definiteness as to bind the District, and, secondly, that if granted, the power assumed to be exercised by the general manager was not within the scope of the delegated power.

The authority of the general manager to sign, the contract is based solely on the terms of resolution No. 781, adopted by the board on January 20, 1925, and on the language italicized in the following paragraph of the resolution: “Be it further resolved concerning the granting of options for the sale of said property at said figure that, if deemed advisable by the general manager, an option or options may be given which in no event shall exceed a duration. ...” It is apparent that the language so emphasized does not assume to grant, except by the merest inference and conjecture, authority to the general manager to sign a contract on behalf of the District. It amounts to no more than authority to the proper officers of the District, to wit, the president and secretary, to sign the contract in case the general manager should recommend the

Want .of power is always a defense available to a public corporation and no act of ratification can breathe life into the lack of power.. If the rule were otherwise the public body could by ratifying a void act, extend its powers without limit. The unvarying rule is that the act of a public body may be subsequently ratified only in case it could

. The next major contention of the defendant is that the plaintiff was acting as the agent of the District at all times in said transactions and as such is foreclosed from making a profit from the sale as against the interest of his principal. The evidence on this point is free from contradiction and is substantially as follows: On June 17, 1924, the board of directors adopted resolution No. 757, reciting that one or more real estate agents had applied for the privilege of attempting to secure a purchaser for the lands which the District desired to sell and to receive a commission for so procuring a purchaser. It was therefore resolved that the District “does hereby authorize the payment of a commission of five per cent of the selling price of any of its lands offered for sale hereafter and sold through the efforts of-any b ona fide licensed real estate broker or agent; and that such payment be made . . . only upon final confirmation of such sale by the board of directors and not otherwise.” The District reserved the right to reject the bids of such real, estate agents or any purchaser introduced by them. In the latter part of 1924 the plaintiff called on the general manager and stated that he thought he was in touch with some people who would be interested in the Deer Park lands. On January 19, 1925, .the plaintiff wrote to the board of directors of the District as follows:

. “ ... I have been with interested parties over the. tract of 459 acres adjoining Deer Park. I have reason to believe that my people are deeply interested in this tract and that there is a good chance for a sale. I will ask that the Board submit.to me in writing the lowest cash price for this tract. I ask that a reasonable time be given me for a'general sur- vey and the completion of detailed negotiations. . . . This sale will be handled through an accredited real estate firm and if completed I will expect the commission established by resolution of the board of directors. Assuring the gentle

men of the board that I have a genuine prospect for a sale and asking cooperation, I am,

“Sincerely and Cordially,

“(Signed) C. 0. Wellock.”

In response to the foregping letter the board of directors on the following day, January 20th, adopted resolution No. 781, naming $50,000 as the lowest cash price for the lands in question. On January 22d the general manager mailed to the plaintiff a copy of resolution No. 781 and stated in an accompanying letter that it was adopted pursuant to plaintiff’s letter of January 19th. In February, 1925, the plaintiff was introduced to John H. Rice and J. J. Greisen by Harold A. Willard. The plaintiff then proceeded to interest Rice and Greisen in the purchase of said lands for subdivision purposes. They would not pay cash, but would agree to pay $60,000, one-fourth down and the balance on terms provided suitable arrangements could be made for release of individual lots and the customary provisions be incorporated in a contract of. purchase and sale. On March 27, 1925, the plaintiff signed a memorandum wherein he agreed to divide the “commissions and profits” from the sale of said lands equally with Harold A. Willard. On April 3d the plaintiff obtained from the general manager the so-called option of that date. On the same day, and in order to be secure in the payment of his commission, the plaintiff exacted and received from the general manager a letter addressed to the plaintiff and signed in the name of the District, by John Burt, general manager, as follows: “In connection with your proposed sale of our property, be informed that the board of directors of the Marin Municipal Water District by resolution number 757 have provided that in the event of sale a commission of five per cent shall be payable to the party negotiating the sale and in the event that sale is consummated through you a commission upon the full purchase price in the percentage of five per cent will be paid to you.” The defendant offered to prove that the so-called option of April 3d and the foregoing letter of April 3d were a part of the same transaction and that the plaintiff stated at the time that he was negotiating with other parties as purchasers, but did not want to disclose their names and therefore desired to take the option in his own name. The plaintiff was charged with fraud in the

As further evidence of the plaintiff’s relation of agent for the District and his claim for commission, on April 10, 1925, he signed the following document: “Whereas I have secured a purchaser for a tract of land of 459 acres of the Marin Municipal Water District at Deer Park on which I will have a commission of $2500 when the sale is consummated; and Whereas I have made a transfer of my right to one-half of said sum to Bishop-Carlson Co. and have still coming to me the other half thereof, or $1250. Now, therefore, and for a valuable consideration, I hereby assign and set over to Fairfax Bank my claim and interest in and to said one-half of said commission, being the sum of $1250, and direct payment to be made of said sum to Fairfax Bank, and the receipt of said Fairfax Bank shall operate as a discharge to my claim to said sum.” At the request of the plaintiff the general manager signed the following, which was appended to the foregoing assignment: “The original of the above assignment, having been this day filed by the said Charles O. Wellock, is hereby accepted as an assignment pro tanto, of said commission when the same becomes due, but if the same never becomes due, no obligation to pay is hereby recognized.”

On April 7th, the plaintiff assigned to John A. Prentice his interest in said purported contract and in and to the plaintiff’s commission in the following language: “I hereby assign to and appoint with like powers set out above, the said John A. Prentice to divide and distribute and take re

On the record the evidence is insufficient to support the findings and judgment as to the item of $10,000 damages. As to the item of $500, it appears that the District still holds the same as the consideration for a void contract, and it should be returned. This court should find from the evidence that the allegations of paragraph X of the defendant’s answer relating to the fiduciary relation of the plaintiff with the District are true. On these findings the judgment should be modified by striking therefrom the sum of $10,000 and as so modified the judgment in the sum of $500 should be affirmed.

Langdon, J., and Waste, C. J., concurred.

Rehearing denied.

Shenh, J., and Langdon, J., dissented.